Parts Shortage Slows the UK’s Green Energy Push

Parts Shortage Slows the UK’s Green Energy Push – And What It Means for Asset Valuations

The UK’s transition to green energy is facing a major hurdle: a severe shortage of critical electrical infrastructure components. Transformers, High Voltage Direct Current (HVDC) systems, and other essential equipment are in increasingly short supply as global manufacturers struggle to keep up with surging demand. This bottleneck is not only slowing the expansion of renewable energy projects but also driving up the valuation of existing electrical assets.

A Perfect Storm of Supply Chain Challenges

There are clear echoes of post-COVID supply chain disruptions in the current crisis. As the UK and other nations push to decarbonise their energy grids, the demand for key electrical components has skyrocketed. According to consultancy group Wood Mackenzie, transformer prices have surged by 40% to 60% in just three years. Even with major manufacturers like GE Vernova, Siemens Energy, and Hitachi Energy scaling up their production, the supply chain remains constrained.

One of the primary reasons for this shortfall is the limited availability of key raw materials such as Grain Oriented Electrical Steel (GOES) and copper. Prices for these materials have risen sharply, making it difficult for manufacturers to expand capacity at a rate that matches demand. Furthermore, the long lead times associated with transformer production – often stretching to years – are further compounding the issue.

The Impact on Renewable Energy Projects

The ramifications of this supply crunch are far-reaching. Renewable energy projects, particularly large-scale wind and solar farms, depend on transformers and HVDC systems to transmit power efficiently across the grid. Without these components, project timelines are being pushed back, increasing costs and delaying the transition to cleaner energy sources.

Several key factors are at play:

• Surging demand: The rapid increase in renewable energy projects has created unprecedented demand for electrical infrastructure.
• Manufacturing bottlenecks: Even as companies expand production, capacity remains insufficient to meet demand in the short term.
• Extended lead times: Some equipment orders now take multiple years to fulfil, stalling green energy projects.
• Cost escalation: Rising raw material costs and supply constraints are driving up equipment prices, further straining project budgets.

Steps Being Taken to Address the Issue

To mitigate these challenges, manufacturers and governments are taking several steps:

• Expanding production capacity: Companies are investing in new facilities and upgrading existing ones to boost output.
• Supply chain optimisation: Efforts are being made to secure stable raw material supplies and streamline logistics.
• Technological innovation: Research into more efficient and cost-effective transformer designs is ongoing to improve production rates.
• Government and industry collaboration: Policymakers, energy companies, and manufacturers are working together to find long-term solutions.

The Valuation Implications of Equipment Shortages

For asset valuation, these supply chain disruptions are having significant effects. The shortage of transformers and HVDC equipment means that existing assets have become more valuable. Companies that own and operate electrical infrastructure may see the worth of their assets rise due to increased replacement costs and long procurement timelines.

Additionally, the financial viability of new renewable projects is being impacted by these cost surges. Higher equipment prices and longer lead times could deter investment or force project developers to reassess their financial models. In the long term, these dynamics could reshape how investors and stakeholders assess the value of energy infrastructure assets.

Conclusion

The UK’s green energy transition is being hampered by a severe shortage of critical electrical equipment, mirroring past supply chain disruptions. While efforts are underway to expand manufacturing capacity and optimise supply chains, the challenges remain significant. These shortages are not only delaying renewable energy projects but also driving up asset valuations for existing infrastructure. Understanding these trends is crucial for stakeholders in the energy sector as they navigate an increasingly complex investment landscape.

About Hickman Shearer

At Hickman Shearer, we specialise in delivering exceptional RICS and ASA certified capital asset valuation, management, and sales services. Our expertise span a wide range of global industries, ensuring that we provide tailored and insightful commercial valuations and equipment valuation services to meet your unique needs. With a strong track record of delivering robust and independent advice, Hickman Shearer is committed to supporting businesses in achieving their strategic objectives. Find out more here >> About Us

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